Mad Money 09/24/26 | Audio Only

My mission is simple: to make you money. I'm here to level the playing field for all investors. There's always a bull market somewhere, and I promise to help you find it. Mad Money starts now.

Hey, I'm Cramer. Welcome to Mad Money. Welcome to Cramerica, friends. I'm just trying to make you a little bit of money. My job is not just to entertain, but I'm doing some teaching tonight. So call me at 1-800-743-CBC. Tweet me at Jim Cramer. Let me tell you why I do this show and why I wrote "How to Make Money in Any Market." For most of my life, pretty much everybody in America recognized that picking individual stocks was a fantastic way to get rich, as long as you did it right. Not everybody agreed on the right way to do it, but practically everyone accepted that it was certainly worth doing. Then the dot-com bubble burst in the year 2000, and picking individual stocks suddenly went out of style, at least for regular people. Suddenly there was a new conventional wisdom on Wall Street: the conventional wisdom of index fund supremacy. Almost overnight, legions of experts, backed up by an endless parade of non-investing journalists, came out of the woodwork making a pernicious argument that you are either too stupid or too imprudent to manage your own money.

They claim that it's more or less impossible to consistently beat the market, so you might just as well park all of your money in an index fund that mirrors one of the major averages like the S&P 500. The more extreme index fund absolutists like to say that no one can consistently beat the market, and if anyone looks like they can or says they can, it's pure luck. That means picking individual stocks is nothing more than gambling where you have no edge. So why not settle for an index fund that can consistently give you an 8 to 10% annual return? Sure, you won't get rich, but you'll steadily make money over time. I like that. After the dot-com bust and then the financial crisis, that argument became pretty darn compelling. This is the ideology, though, that is absolutist, and for that, I think it's wrong. I've been fighting it since Mad Money first went on the air. Why? Because, as I explained in "How to Make Money in Any Market," it doesn't work. If you're willing to do the homework, and it's never been easier to learn about the companies behind your stocks, individual stocks can change your life. They can make you rich in a way that no index fund ever could. And it happens. I have seen it endlessly with my own eyes. And hey, it's absolutely possible to beat the averages. Take the S&P 500, the benchmark of all benchmarks. There are 500 stocks in the S&P. Most of them are not all that good. In fact, at any given moment, I don't think there are 500 good stocks in the entire market. So when you buy an S&P 500 index fund like the SPY, you're buying the good with the bad, which brings me to the unvarnished truth: you will most likely not get rich just by owning index funds. That's why I still recommend putting 50% of your savings in an index fund. I'm a believer, but that's purely as a hedge against the mistakes that do inevitably occur when you manage your own money. Picking stocks is high risk, higher risk than owning an index fund, so you need the index half as backup. But at the end of the day, an S&P 500 index fund is merely an amalgamation of a few good stocks with a lot of mediocre ones and plenty of flat-out bad ones. The stocks of fresh-faced wonders regularly get added to the index, but they're still outweighed by everything else.

And that's the crux of my argument. If you follow your nose, eyes, and ears, if you know how to look for opportunities, then I believe you can trounce the indices. But if that's the case, how did index fund supremacy become the conventional wisdom? Simple. There's a whole industry of financial advisors who can't afford to waste time focusing on you, focusing on regular people. That's not where they make their money. So the most responsible thing they can do is tell you to park your money in an index fund. You'll do okay, certainly better than you would keeping it in cash or a checking account or money market fund. And the financial advisor never has to hear from you again. I'm not saying this to blame those guys. I was one of them. It's not like the professionals are out to get you. Even if they wanted to help you, they can't because, you see, you're not rich enough. In my years at Goldman Sachs, I spent a lot more time trying to find billionaires to advise than helping regular people with their money. We called it elephant hunting. We were looking not for families with hundreds of thousands or even millions of dollars, but with hundreds of millions of dollars. And this was back in the '80s, when a million bucks went a lot further than it does now. It takes just as much time to service someone with a small pot of gold as it does to help the oligarchs, which is why these firms devote so much time to helping the extraordinarily wealthy and so little time to help everyone else. Unfortunately, our financial regime in this country is actually a lot like our health care system. It's impenetrable and it caters to the wealthy. Anybody else has to hope that their provider has an ounce of knowledge and enough empathy to share it with you. The difference is that it takes years to become a doctor, but it's much easier to become your own portfolio manager. An index fund is what the financial doctors prescribe when you don't have top-tier insurance. It's the best they can do under the circumstances, but you can do better on your own as long as you're willing to put the work in. While I respect index funds for what they are, they'll never give you enough juice to get you to really where you need to go. Consider them insurance against your individual stock portfolio blowing up in your face. They're a bit of a safety net. Your real gains, though, will come from the other half of your holdings, which I recommend putting in five individual growth stocks across a diversified set of industries and one non-stock hedge, like maybe gold or even crypto. The S&P 500 is the average choice. The stocks in the index are not selected for their greatness. They're selected because they mirror American business. The keepers of the index don't put a premium on growth stocks, even though growth stocks have historically been the best performers. Again, I don't blame them because that's not the point of the S&P 500. But I do blame the people who insist that index funds are the best you can do. While there are some growth indices out there, I don't want you to own good growth and bad growth. I only want you to try to find the best growth companies. Those are the ones that, historically speaking, are most likely to make you rich.

Sticking purely with the index funds will only make you average. Of course, it's better to be average than broke, which is why I still advise putting half of your savings in an index fund like the SPY. But you need to use the other half to go after bigger gains. Unlike most professionals, I see the world as divided between two kinds of risk: the very real risk that comes from losing money in a bad stock, and the just as real risk of missing out on a great stock that could give you a 1,000% return over time and transform your entire life.

Unlike the index fund evangelists, I think you can walk with an index fund and chew bubble gum with individual stocks at the same time. Here's the bottom line. Like I explained in "How to Make Money in Any Market," putting some money in an index fund isn't bad advice. It's a good way to play it safe. But most people can't afford to purely play it safe unless they're already rich. Which is why you have to put the other half of your holdings in the mix of individual stocks that you choose and a non-stock hedge. How to pick them? Stay tuned and you'll find out. Let's go to Jacob in New York, please. Jacob.

That's the one that got me excited to start investing, actually. My dad... Mr. got me excited investing. I'm sorry, but he was a great man. He was a great man. How can I help?

Okay. I'm not so interested in the short-term trading. I understand you might want to do that. I think you go with the highest growth stocks. You just really have your whole life ahead of you to make a lot of money. So let's load up with an index fund, but then the highest growth stocks, and then pick one stock that you think is really speculative. And if it doesn't work, you get another one. But we're going to go for gusto. We're going to go for the best early on and let them compound. I want to go to Glenn in Illinois. Glenn.

Okay. Well, let's be sure. I have a huge amount of money in index funds and ETFs. I am not against them. I am saying that I am a throwback to the way it always was before people went nuts with index funds. I like to have a mixture of both. I can't own stocks myself, so of course I own mutual funds and I own ETFs, but I just think they're part of the mosaic, not all. That's my bias. The people who like only index funds, I call them into question. I am willing to coexist with them, but they're not willing to coexist with me. Kelly in Florida. Kelly.

Well, I am always reluctant to use stop orders because sometimes what happens is you just blow right through your levels. You end up with the worst price of the day. You're at the mercy of the market. I like to set limit orders, and I think that that way you will never come up with something that says, "How the heck did that happen to me?" All right. I'm not saying owning an index fund isn't a good idea. I love it. But you only make real money if you pair that index fund with some high-quality stocks, like we used to do before people went nuts owning just mutual funds that are index, that are levered only to the index. On Mad Money tonight, I'm teaching you all about how to make money in any market, starting with how I came up with my famous investing acronyms and how you can find out some of these on your own. Then, if you pick your own stocks, you have to have an edge. I'm giving you one mantra to keep in mind that'll save you from embarrassment and losses. And there's plenty of stocks you can buy, but there are definitely others you should avoid. I'm running through the list of pitfalls that you should stay away from when looking for names to add to your portfolio. So stay with Cramer.

Like I told you before the break, we live in a time where picking stocks is stigmatized. The most respected experts in the industry are always telling you to own index funds. And for the most part, the big boosters of individual stocks often love to promote the most speculative stocks in existence, insanely high-risk stuff that often blows up in your face. Tonight, I'm coming out here to advocate something very different: good old-fashioned growth stock investing. Today, this is widely considered heretical, but for most of my lifetime, it was the most orthodox opinion on investing, and it did well. I'm just trying to teach you what generations of investors knew to be self-evident. Unfortunately, these days, the sophisticated operators love to tell you that people are too stupid to manage their own money. I find it insulting. But I've got to tell you, when you look at the history, it's not that hard as long as you know how to stick to your guns. This is my thesis, by the way, in "How to Make Money in Any Market." In every market, there are leaders. These are what I call hero players. We must strive to find them, and man, sometimes they're incredibly obvious to find. Of course, I've had plenty of clunkers in my day, but with the power of observation, some curiosity, those are the two things you need, you can absolutely identify some of these phenomenal winners. And when you find a hero player, even if it's just one stock in your five-stock portfolio, that's enough to produce some tremendous life-changing returns and maybe far outpacing the S&P 500. Let me give you a little history lesson. Back on February 5th, 2013, on this program, I introduced the term FANG. That was Facebook, Amazon, Netflix, and Google. And I urged people to invest in the four FANG stocks right then and there. And I really pushed it so hard. I pushed it many, many days, many, many years. The acronym was the culmination of my work with the trader and analyst Bob Lang, who worked with me at TheStreet.com. We were searching for a way to shine a spotlight on the best growth stocks of the time. We wanted everyone to buy. A decade later, when Bank of America strategist Michael Hartnett coined the term Magnificent Seven for the slightly expanded and adjusted group of Alphabet, which is the old Google, Amazon, Apple, Meta Platforms, that's the old Facebook, Microsoft, Nvidia, and Tesla, I went all in. My charitable trust had already owned six of the seven, seven Tesla, so it seemed only sensible. You can now follow the trust by joining the CNBC Investing Club. So you have to ask, how did I spot FANG, or FAANG, which was how I integrated Apple, and why was I so quick to embrace six of the Magnificent Seven years before the term was coined? Simple: my eyes were open. I'm always hunting, not just for Amazon, but for the next Amazon or the next Netflix, next Nvidia. Once the Magnificent Seven lose their magnificence, then there are another seven out there, believe me, that are just waiting to be found, and they too could be very obvious. But as long as I think these proven winners can stay strong and deliver, I'll stick with them. That said, look, I'm confident there are many, many more amazing growth companies with incredible stocks around. I hear about them every... I hear about it right now. I hear them from you in the lightning round. Here's the thing about FANG and the Magnificent Seven: they were obvious. They were in your face. You could see them moving higher day after day for years. Your kids can tell you all about them. In some cases, these went up for more than a decade. You didn't have to be a genius to make money in these things. In fact, being a genius might have hurt you. A lot of people in this business are too clever by half. They see a good thing and then they overthink it, scaring themselves away from phenomenal winners. Let's say that on the day I introduced FANG, the FANG acronym, remember, this is when these companies were already established, already the big ones you knew about, no incredible discovery required, you decided to put $1,000 into each of the four. Let's do the math here. And then you put an equal amount, $4,000, right, because there's four, into an S&P 500 index fund. Now, from that day in early 2013 through the end of 2024, your $4,000 in the S&P would have been terrific. It would have turned into $19,400.

That's a 14.2% annual return. Not bad. But let me ask you, what if you invested $1,000 in each of the four FANG stocks like I suggested? Adding them all up, FANG would have turned your four grand into $82,655 from 2013 through the end. Which would you prefer, $82,000 in those four hero stocks or less than $20 grand in the S&P 500 index fund? It is a choice. It's your choice. It really is. Oh, and Apple, which hadn't been added to FANG at that point, would have turned your $1,000 into $17,994. So double-A FANG was also a winner. Does this prove anything? I'm sure that some people say, hey, listen, it was backdated. Others would be saying it's cherry-picking because those are five of the greatest stocks of all time. Yet here's the deal: why? That's not true. I was coming on air practically every night and recommending them. They were hiding in plain sight like Edgar Allan Poe's purloined letter. They were companies that you probably interacted with every day. Why can't you find them? They were there for you. You knew them. They were available and obvious to anyone who cared to pay attention. In fact, before I aired the segment on FANG way back in 2013, do you know what I did? I wondered if it was a waste of time because these four stocks were so obvious. Everyone knew them. Was I really bringing anything new to the table by highlighting them? In retrospect, it was good to pay attention. Still is. But let me... let's put my personal examples aside for a minute. A couple years ago, an economist from Arizona State University, a fellow by the name of Hendrik Bessembinder, published a paper on the difficulty of picking individual stocks. Now, he's another supporter of index funds because he found that only a small number of individual stocks produce the vast bulk of the market's gains. I look at the same numbers and come to a very different conclusion. Looking at data from December 31, 1925 until December 31, 2023, Bessembinder sought to examine how well you could do with stocks, provided you reinvested dividends and didn't sell. His first finding: historically, the majority of the 29,078 stocks he looked at did not make money. Now, it shouldn't shock you. I'm not telling you to invest in just any old stock. Most stocks have zero pedigree, and their gains are often the product of an overenthusiastic public and greedy investment bankers trying to feed the maddening mob. His second finding: there were thousands of stocks that would have absolutely made you money, but perhaps not enough to justify investing in them instead of an index fund. Now, a decent return, but an average return for average investors who want to see average gains. Index funds, they're fine, but they're not the heroes we're looking for. And remember, I still advocate them. His third finding: 17 stocks delivered cumulative returns of more than $5 million, or $50,000 per dollar invested. That means a $1,000 investment would have yielded upward of $50 million. All right. Now, these were all relatively well-known companies: Boeing, IBM, Coca-Cola, Deere, Johnson & Johnson. They could have made a fortune. Bessembinder thinks that that's like finding a needle in a haystack. Do you think that? Do you really? The bottom line: it's only hard to find these hero stocks if you're picking randomly. For anyone with eyes to see, we're talking about obvious winners that tend to keep winning for years and years. Those are the stocks I'm always looking for, and when I find them, I'm never going to shut up about them. More Mad Money after the break.

I want to make people better investors. If they make money, fantastic. Let's go to work.

All night, I have been making the case for picking individual stocks rather than parking all of your money in an index fund that mirrors the S&P 500. As I point out in "How to Make Money in Any Market," very few stocks generate tremendous long-term outperformance. But the ones that do rarely come out of nowhere. They tend to be obvious, high-profile, usually in the kind of business that you regularly interact with in your everyday life. But this is a big but. If you're going to pick your own stocks, you need to have an edge. When I got started in this game, it was much harder to access information, which made investing a real headache, very time-consuming. At the same time, though, it was also much easier to get an edge, to know something that other investors don't, because there was all sorts of data buried in places that no one would ever look. These days, everything is on the internet. A few search queries, maybe a little dialogue with one of the chatbots, and you can access most of what's relevant that you need to pick a stock. You barely even need to think about it. In my day, it was very different. When I first started picking stocks, I was working at a place called The American Lawyer in New York City. I moved from the back seat of my Ford Fairmont to my sister's couch. I was able to put away a little money, so I opened a brokerage account and started reading articles in business publications. Back then, I was always keeping an eye on stocks with low dollar prices, single-digit names, because I assumed I'd get more bang for my buck if I could buy more shares at once. God, I was young. But back then, you had to speak to a human when you placed an order, and I didn't want to embarrass myself by saying I wanted to buy seven shares or something. I could imagine the broker on the other end snickering to herself, laughing at me while I was paying my 2% of the trade in commission, a couple bucks perhaps. Now, most brokerages charge you no commission at all, and you can do it all without ever speaking to a human. Of course, I had no idea what I was doing when I got started. My first stock was a stock called American Agronomics. It was a Florida-based company built around orange groves. The American Lawyer had Forbes sent to its library, and I figured nobody knew stocks better than Forbes, right? Forbes recommended the stock. What could be better than owning an orange grove? People are always going to be drinking orange juice, right? Keep in mind this was a few years before "Trading Places," an all-time great comedy with Eddie Murphy and Dan Aykroyd, where the bad guys lose a fortune trading orange juice futures. But I don't think Eddie Murphy was even on Saturday Night Live at that point. So I bought 10 shares of American Agronomics for 10 bucks each. Then I sat back to watch the magic happen. Well, almost immediately, Florida had a rare flash frost, and the stock almost went to zero. Desperate to make money, I dug deeper until I could find a stock that sold for an even lower price, so I could buy even more shares. I returned to Forbes, and this time I found a stock called Bobby Brooks. It was a women's fashion company. As little as I knew about growing oranges, I knew even less about women's fashion. Didn't matter. At just two bucks a piece, I bought 100 shares. How much did I lose? How about everything? Soon after I bought the stock, it started slinking lower and then lower again. Bad selling season, wrong clothes, bankruptcy. Yikes. I remember thinking that the saving grace of the stock market was that a declining stock can't go below zero. In retrospect, given that I knew nothing about women's fashion, I deserved to lose everything, didn't I? And that's when I decided my mistake was not knowing more, much more, about these companies than what I read in Forbes. These articles were meant to be a starting point, yet I was treating them as an endpoint, the last thing I looked at before I pulled the trigger. I'd done no research on either stock, and I couldn't figure out where to start. I was close to giving up until I got a call from a childhood friend who told me that there was some hiring going on in the neighborhood I was in, Philadelphia. He told me that a local fastener company, screws, bolts, was looking for workers. It was called Standard Pressed Steel, SPS, almost 80 years in business at the time. He suggested maybe I should take the job. It was much better than the money I was making as a journalist, although that's a low bar. I didn't take the job. But you know what? I recognized what my friend was telling me as useful information. Standard Pressed Steel was...

hiring. That must be doing well. The stock was at 35. I had to wait until I could replenish my coffers enough to buy five shares. Before pulling the trigger this time, I decided to learn a little more about the company. Was it making money? Was it losing money? Here's a simple lesson: when a company got so much business that it needs to hire more workers to meet demand, that's a good sign. But that was all I knew. So I decided to hit the books. I found a kind librarian at New York City's giant flagship library who passed me off to a second librarian who knew something about business. She explained to me that public companies had to file anything important that they did with the Securities and Exchange Commission, or SEC. She sent me to a separate library at a separate building that had those filings. There was no central index of anything back then. No search query, no recent information. I was flying blind. All I knew was this company, SPS, needed more workers. I decided, you know what, that's enough. I bought my five shares.

The stock immediately jumped and I made 15 bucks. That didn't make up for my previous losses, but I decided it was terrific to make some money in stocks. I sold it. Looking back, I should have stuck with SPS, which was eventually bought by Precision Casports, which in turn was bought by Berkshire Hathaway. After I sold my shares, I analyzed what I'd done right and what I'd done wrong on these first three trades, something that's become a ritual for me on every trade.

On the first two, American Aggronomics and Bobby Brooks, I was basically just relying on journalists who were relying on sources who wrote articles that they thought were right. I liked the orange grower stock because I figured that people would always drink orange juice. What kind of edge was that? I also liked that it was only $10, but that was irrelevant. As for the flash frost that wiped out the orange harvest, I'd lived in Florida. I even covered a couple of these freezes for the Talisy Democrat right out of school. No excuses there. My Bobby Brooks trade was a pure revenge trade because I was trying to make back the money I lost. But it turned out to be a revenge against myself. I knew nothing about women's clothes. Nothing about the cut. None at all. I didn't even know how to read the numbers. Not that I looked at them.

What did I know to win on SPS? I knew something that wasn't widely known, at least back then. I knew they had more business than they expected. It wasn't everything, but it was something that few outside my neighborhood would have known. I had an edge. Which brings me to the bottom line. As I explained in How to Make Money in Any Market, you should never buy anything that you don't have some personal knowledge about unless the stock in question belongs to a well-known best-of-breed operator. But for the vast majority of stocks, don't even think about buying them unless you actually know something about the underlying company. And remember, it's never been easier to find out. Let's go to Lois in Massachusetts. Lois.

Hi, Lois. How are you?